Gold Yawns into a Hot Summer Weekend

Gold Yawns into a Hot Summer Weekend

Commentary for Friday, Aug 10, 2018 – Gold closed down $0.80 at $1211.10 – so another slow day at the ranch. It closed this past Monday at $1208.60 so on the week we all fell asleep over $2.50. As gold gets cheaper I can’t say the US trade gets more interested. We have seen some bargain hunting across our counter but the action remains sluggish and typical of what old school traders used to expect during the summer months.

There is some fresh talk about a bottom for gold from Kitco’s Peter Hug (maybe) which helps but with Chicago Federal Bank President Charles Evan touting one or two more interest rate hikes before the end of the year I think gold breaking down at $1200.00 is more likely.

But it’s worth noting that gold did close higher today even as the Dollar Index pushed higher (96.14) so the question of further weakness in gold remains clouded.

Exactly how this will all play out is difficult as inflation moves up to 2% and trade uncertainty continue to pressure world markets according to Reuters. Cheaper prices in the metals have the obvious positive aspect of creating new interest but at this point the US market remains fragmented with new investment money looking at Wall Street not a growing inflation problem.

So the talk of a “bottom” for gold is beginning around the edges but the bears are still running in the woods as the “safe haven” appetite remains soft.

There are hot spots which should suggest at least some financial caution in the paper markets but these however dangerous do not carry enough weight to infuse excitement into the gold trade. You would think that runaway inflation and civil unrest in Venezuela or safe haven gold buying in Iran as that country struggles against sanctions and fiat paper currency would create some buzz. But it has not – most likely because the drop in prices this past month from $1260.00 through a challenge of the $1200.00 support line has created a rather large yawn.

So China, Venezuela or Iran do not move the interest needle today – amazing really. The complacency factor pays tribute to just how numb the entire world has become over big business which provides little to the middle class and big government which provides colossal mismanagement in the bargain.

I have always been a big fan of Ronald Reagan’s dictum “Trust but verify”. Actually he coopted this suggestion from a Russian proverb but it holds up as well today as during his administration. I’m not suggesting we in the 21st Century should fear our own government but have always thought putting all my eggs in one basket sets up a scenario I would like to avoid. And since I can’t really “verify” I can be suspicious and this leads me to the gold and silver bullion insurance.

Spending during the Trump administration is a good place to be suspicious. Off the charts by any measure and yet as our economy is coming back into focus Pence is detailing a plan for the creation of Space Force which would become the 6th branch of the military. That kind of talk makes Regan look like small change as I continue to wonder who is going to pay back all this leveraged borrowing? At the very time when everyone should be asking more questions and buying more gold privately it remains unclear whether gold will hold $1200.00? It is kind of like our monetary compass is not working so for now if your financial sense of balance is making your head spin don’t feel bad – you are not alone.

As for customers in this market – there are several types – buyers trying to catch that near term bottom number just in case this market quickly turns around. Those still very interested but patient – waiting for that blow-out bottom number.

And overseeing all of this is the traditional Asian market – still not engaged so they anticipate lower numbers. Finally there are virtually no large sellers at these yearly lows for gold.

This mix is a potent brew for the physical market and promises fireworks when that monetary compass starts working again and everyone gets on the same page.

This from Zaner (Chicago) – “So far the gold and silver markets have not benefited from the potential for financial crises developing around the sharp declines in Turkish and Russian currencies. In fact Russian dialogue to the US overnight, that the tariffs are essentially a declaration of war on them is certainly creating the potential for a situation where money looking for safe haven might venture beyond US Treasuries. However a fresh upside breakout extension in the dollar to the highest level since July 2017 this morning rekindles pressure on all metals and commodities. At least to start today gold and silver look to behave like a classic physical demand driven commodities fearful of slowing demand from a number of geopolitical battles. It is possible that gold, silver, platinum and palladium might draft minimal support from the recent gains in Chinese equity markets, but further signs that the Chinese currency is recovering (not just stabilizing) might be needed to create hope that gold purchasing power of Chinese buyers will improve enough to stoke gold buying. Unfortunately for the bull camp in gold and silver, the fresh bullish action in the dollar trade is fanned further by Fed predictions of two additional US rate hikes this year, and that combined with the trade war orientated safe haven flow leaves the greenback with upside momentum. Following recent patterns, gold and silver look to remain under pressure until the ever-expanding list of global flashpoints suddenly provides safe haven buying interest for precious metals.

We suspect that platinum and palladium will continue to draft minimal support from the recent pattern pf recovery in Chinese stocks and also from any stabilization of the Chinese currency. Given the outperformance of palladium over platinum on the bounce yesterday, it is a good bet that technical short covering fed the bounce in Palladium yesterday. In other words, the palladium market was clearly the most oversold market and therefore palladium’s strong bounce was a logical balancing reaction to the sharp slide earlier this week. As in the gold market, it is extremely difficult to call for an end to the slide in the palladium market with further lower lows expected without a sudden improvement in US/Chinese relations. Weak support in September palladium is seen at a quasi-double-low around $885. On the other hand, the platinum market continues to build a solid base of support off an extending consolidation pattern and that should offer support at $823.30.”

Silver closed down $0.15 at $15.27.

Platinum closed down $4.50 at $824.80 and palladium closed up $2.70 at $909.10.

This is our usual ETF information – All Gold Exchange Traded Funds: Total as of (8/1/2018) was 67,055,115. That number this week (8/8/2018) was 66,684,125 ounces so last week we dropped 370,990 ounces of gold.

The all-time record high for all gold ETF’s was 85,112,855 ounces in 2013. The record high for Gold ETF’s in 2018 was 70,763,846 and the record low for 2018 was 66,684,125.

All Silver Exchange Traded Funds: Total as of (8/1/18) was 651,702,585. That number this week (8/8/18) was 656,860,249 ounces so last week we gained 5,157,664 ounces of silver.

All Platinum Exchange Traded Funds: Total as of (8/1/18) was 2,325,049. That number this week (8/8/18) was 2,324,928 ounces so over the last week we dropped 121 ounces of platinum.

All Palladium Exchange Traded Funds: Total as of (8/1/18) was 962,289. That number this week (8/8/18) was 989,315 ounces so over the last week we gained 27,026 ounces of palladium.

Our Patented Employee Survey – Gold’s Direction Next Week?

Of course, it’s not really patented but we do have some fun along the way. This is what the GoldDealer.com employees think: 8 believe gold will be higher next week 1 thinks gold will be lower and 1 thinks it will be unchanged.

Our Patented Customer Survey – Gold’s Direction Next Week?

Like the employees, our customers were given three choices – up – down – unchanged. We limited the survey to a random sampling of 100 transactions – unscientific but worth considering because these people took action: 56 people thought the price of gold would increase next week 30 believe the price of gold will decrease next week and 14 think gold prices will remain the same.

Precious Metal Closes & Dollar Strength– Aug 6 – Aug 10

The GoldDealer.com Unscientific Activity Scale is a “2” for Friday. The CNI Activity Scale takes into consideration volume and the hedge book: (Monday – 4) (Tuesday – 4) (Wednesday – 3) (Thursday – 4). The scale (1 through 10) is a reliable way to understand our volume numbers. The Activity Scale is weighted and is not necessarily real time – meaning we could be busy and see a low number – or be slow and see a high number. This is true because of the way our computer runs what we call the “book”. Our “activity” is better understood from a wider point of view. If the numbers are increasing – it would indicate things are busier – decreasing numbers over a longer period would indicate volume is moving lower.

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